NEW YORK (CNNmoney) - Bayer AG will remain the sole supplier of anthrax treatment Cipro for Canada after the Canadian government backed off a threat to purchase cheaper versions of the drug and agreed to a deal with Bayer Monday night.

Bayer said in a conference call Tuesday Canada has decided to "respect the validity of Bayer's patents" and exclusivity of the company's regulatory approval. The patent expires in 2004 in Canada.

Cipro, generically known as ciprofloxacin, the drug of choice for treating anthrax, is in huge demand due to a surge of anthrax cases that has hit the United States one month after suicide hijack attacks in New York and Washington.

Bayer said it has millions of tablets in its warehouses and will be shipping 1 million tablets, enough to treat 100,000 people for inhalation anthrax over five days, to Canada within 48 hours.

"The goal of the agreement reached yesterday is to guarantee the immediate supply of the population in the case of terrorist attacks with biological weapons," the company said.

The Canadian government had been criticized by its own parliamentary opposition last week for ordering generic pills from Apotex Inc., a privately-owned Canadian drug maker that has tried for years to shatter Bayer's patent on Cipro.

There have been no cases of anthrax in Canada so far, and Canada's decision to ignore Bayer's patent contradicts a decision by U.S. health officials to respect the patent and trust Bayer to produce adequate supplies.

The head of the International Federation of Pharmaceutical Manufacturers Association slammed on Monday Ottawa's decision to order 900,000 tablets from Apotex, saying the move was unwarranted and threatened to undermine research on new drugs.

Bayer said any ciprofloxacin tablets ordered by the Canadian government before Oct. 22 will become the property of Bayer, but a spokesman could not comment on who would be paying Apotex for those tablets.

Canada's health ministry, Health Canada, confirmed the agreement with Bayer, saying in a statement it had "agreed to deal appropriately with the order placed with Apotex for ciprofloxacin" in a manner acceptable to both Bayer Inc. and Health Canada.

Generic Cipro waiting in wings

In the United States, where Bayer's Cipro patent expires in 2003, generic drug makers could be churning out cheaper alternatives in three weeks, if necessary.

Barr Laboratories Chairman and CEO Bruce Downey told CNNfn his company could be producing generic Cipro by mid-November, making 30-to-40 million tablets per month.

That decision would be up to Bayer, as holder of the patent.

Barr challenged Bayer's Cipro patent and then settled in return for payments of about $30 million per year and six months' excusive production of a generic before the patent runs out.

Downey stressed the payments are part of the settlement and his company is not being paid by Bayer not to produce the drug. -- from staff and wire reports